Fraud and Identity Theft

Aug. 19, 2013 – TaxTalk Blog

Did you know hundreds of fraudulent Indiana tax returns are filed each year? Did you know these returns could use stolen financial information, causing taxpayers to unknowingly commit tax fraud?

If you did not, this blog will help explain the realities of tax fraud and identity theft, which cut essential funding and can damage credit ratings.

What is tax fraud?
Tax fraud occurs when an individual or business entity willfully and intentionally falsifies information on a tax return to limit the amount of tax owed. Basically it’s cheating on taxes, and it hurts us all by decreasing money available for essential local and state services. Plus, fraud hurts honest business owners and individuals who pay the correct taxes every year.

Tax Preparation Fraud
Taxpayers can commit fraud by using a dishonest tax preparer. Unfortunately, dishonest tax preparers may try to:

  • File a return using a taxpayer’s financial information without consent
  • Inflate expenses, claim false deductions, claim bad credits or excessive exemptions
  • Alter a taxpayer’s return without consent
  • Provide a taxpayer a fake or different copy of their return
  • Steal refunds by directing them to a different bank account
  • Promise refunds that are never or only partially received
  • Send fake refund checks

Therefore, its important taxpayers review their returns carefully. For tips about finding a tax preparer visit the department’s Professional Tax Preparers website.

Other Examples of Tax Fraud
Tax fraud materializes in many ways. Some common examples include not paying all types of taxes, not reporting all income received during the year and creating false records that overstate expenses. For a thorough list of tax fraud examples, visit our tax fraud definition page.

How Tax Fraud Hurts You
Many times those who are committing tax fraud will also steal individual’s identities. Identity theft occurs when someone obtains your personal information – such as your Social Security number, credit card or account numbers, passwords, etc. – to defraud or commit crimes.

Sometimes criminals file fraudulent tax returns with financial information acquired from identity theft. If someone filed a tax return with your name, if you have an overdue balance from a year you did not file, or if there are confirmed IRS records of wages from an employer you never worked for, you may have been a victim of identity theft.

You can avoid identity theft with simple security measures like protecting your financial documents. Learn more on how to avoid ID theft at the department’s identity theft page.

Reporting Tax Fraud
If you are aware of a tax preparer who is preparing fraudulent returns, someone who is not reporting all their income, or a business who is still operating with an expired Registered Retail Merchant Certificate (RRMC), then the department asks you to report it as soon as possible.

Consumers can report fraudulent taxpayers easily and anonymously online through our tax fraud information referral, or by calling the 24-hour Indiana Tax Fraud Hotline at (317) 232-2271.

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